Present day practice of following fixed schedules of oil change intervals could result in loss for the equipment owner, as the oil is not utilized up-to its maximum useful life. Similarly, the extended use of engine oil beyond maximum useful life is of high risk, which could lead irreversible and catastrophic damages to engine parts. Engine oil condition indicates the condition of engine parts, in any application. Therefore, monitoring the condition of the oil in real time is of paramount importance. Researchers had established that the engine oil degradation correlates with change in dielectric property of the engine oil. The important factor to realize the on-line real time monitoring of the changes in dielectric property of the engine oil is, the cost of dielectric sensor within affordable limit for an operator. Current work aims at developing such a low cost affordable dielectric sensor and engine oil samples (SAE 15W40 grade) were collected from durability test engines used in engine test rig and on-road vehicles. These samples were tested for physical and chemical properties. Any changes in the properties, of engine oil monitored, indicate that it undergoes degradation due to usage. A prototype of capacitive type sensor was developed and validated with reference fluids. The dielectric values measured using proto type sensor in the used oil samples show a correlation with change in physical properties. This trend and thresholds of dielectric provides effective plat form to monitor the engine oil degradation. The sensor could be coupled to a suitable warning device by incorporating specific algorithms.